About the Coalition

Finance Ministers hold the keys to accelerating climate action. They know most clearly the risks posed by climate change, and recognize how taking action could unlock trillions in investments and create millions of jobs through 2030.

The Coalition of Finance Ministers for Climate Action brings together fiscal and economic policymakers from over 90 countries in leading the global climate response and in securing a just transition towards low-carbon resilient development.

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The Helsinki Principles

The six Helsinki Principles guide the Coalition's commitment to #ClimateAction

Helsinki Principle 1: Align Policies with the Paris Agreement

Align our policies and practices with the Paris Agreement commitments
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Helsinki Principle 2: Share Experiences & Expertise

Share our experience and expertise with each other in order to provide mutual encouragement and promote collective understanding of policies and practices for climate action
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Helsinki Principle 3: Promote Carbon Pricing Measures

Work towards measures that result in effective carbon pricing
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Helsinki Principle 4: Mainstream Climate in Economic Policies

Take climate change into account in macroeconomic policy, fiscal planning, budgeting, public investment management, and procurement practices
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Helsinki Principle 5: Mobilize Climate Finance

Mobilize private sources of climate finance by facilitating investments and the development of a financial sector which supports climate mitigation and adaptation
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Helsinki Principle 6: Engage in NDC Development

Engage actively in the domestic preparation and implementation of Nationally Determined Contributions (NDCs) submitted under the Paris Agreement
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Workstream: Adaptation

Adapting to the risks of climate change to moderate potential damages or to benefit from opportunities
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Workstream: Green and Just Transition

Combining environmental sustainability with social justice must be considered in any effort to build a more sustainable future for everyone
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Workstream: Nature

Prioritizing nature-based solutions in budgeting decisions is imperative for the Ministries of Finance to mitigate environmental impact
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92

Member countries

43%

of global carbon emissions

69%

of Global GDP

Member Countries

 

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Towards a coalition for capacity on climate action for finance ministries

June 14, 2023

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Photo: maple 90/Stutterstock

This blog is authored by Masyita Crystallin, Ralien Bekkers, Etienne Espagne and Jean-Francois Mercure.

Please note: this blog has been cross-posted on the WBG website.

In 2022 alone, exceptional floods in Pakistan, heat waves in South Asia, an unprecedented winter drought in Europe and the impact of increasingly regular extreme weather events on small island states around the world have brought the potential impact of climate change on human lives into sharp focus.  The effects of climate change are overlapping with an unprecedented series of interlinked crises in the form of rising debt, challenges in recovering from COVID-19, food price inflation and geoeconomic fragmentation. This calls for a revamping of the way we plan economic, energy and environmental policies, putting climate action at the core of policy strategies.

To implement the Paris Agreement, countries are developing Nationally Determined Contributions (NDCs) and Long Term Strategies to which offer a vision of emission reduction pathways with different time horizons. Quite often, the ministry of environment is responsible for these plans and their regular updates, although not necessarily with a close coordination with finance ministries. As finance ministries oversee revenues and expenditures of all government departments, they shape through these decisions the concrete feasibility of any long-term strategy or investment plan.  They are managing the inevitable resulting trade-offs without necessarily having the full analytical capability at hand.

Finance ministers are well aware of climate change, its impacts, and of mitigation and adaptation solutions. The Coalition of Finance Ministers for Climate Action, initially created in 2018 with 39 countries, now regularly assembles more than 80 finance ministers on climate-related topics. The current Coalition  represents more than 66 percent of global GDP and 40 percent of global carbon emissions.  It offers a global vector of coordination of finance ministries on climate action, both in terms of domestic enhancement of capabilities, and international support for action.

However, the knowledge of finance ministries on climate matters remains unevenly disseminated across countries and within each finance ministry. And it is not always well coordinated with line ministries such as ministries of environment, transport, or planning. When asked about climate change impacts and policies, finance ministers tell us that they have patchy and inadequate access to tools and analytical capabilities for the quantitative assessment of climate risks or the opportunities in addressing climate change mitigation and adaptation.  In addition to this, they mention peer learning between finance ministries as an essential enabler of raising ambition and action.

A new Coalition for Capacity on Climate Action (C3A) convenes finance ministries and their ecosystem to provide integrated and common solutions for implementing climate-aligned development strategies. The program aims at filling gaps in knowledge and dissemination, in close coordination between the World Bank and the Coalition of Finance Ministers. What sets the C3A program apart is that it is a demand-driven initiative.  As country specific socio-economic conditions differ, the program will pay particular attention to an initial needs assessment that will be conducted as part of the key activities. Regional and thematic hubs play an essential role in connecting specific capacity-building needs to a wide range of knowledge providers across regions. This approach of C3A will not only build capacity to better equip finance ministries to tackle the problems at hand. By bringing together diverse perspectives, leveraging local knowledge, promoting ownership, C3A will contribute to the long-term sustainability and effectiveness of policy making.

The Summit for a New Global Financial Pact will soon be held in Paris in June 22-23, 2023. It aims to redefine a global financial architecture for addressing climate change and nature loss mitigation, as well as development challenges.  This global agenda deeply converges with the C3A approach. If policies are the sails of a ship, guiding its course, it is the crew's skill and dedication that determine whether it reaches its destination. This is the role that C3A has set for itself.

Global Event | From Guide to Action: Strengthening the Role of Ministries of Finance in Driving Climate Action

Submitted by Maria Koreniako on Tue, 05/30/2023 - 12:08

We are pleased to invite you to our featured global event "From Guide to Action: Strengthening the Role of Ministries of Finance in Driving Climate Action," on Thursday, June 15, 2023, (Virtual: 08:00 Washington/14:00 The Hague/19:00 Jakarta).

HP2 Publishes Summary of the Report on Strengthening the Role of Ministries of Finance in Driving Climate Action

April 13, 2023

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View/download the summary

View/download the draft report

A new policy brief summarizes a forthcoming flagship report and guide from the Coalition of Finance Ministers for Climate Action. This is the culmination of an extensive global consultation process launched at COP27 on the role of Ministries of Finance in driving climate action. 

By taking bold climate action to accelerate the transition to a zero-carbon economy, it is possible to tackle escalating risks, achieve macro stability, enhance resilience, create growth and development opportunities and deliver clean, secure and affordable energy.

Here we present a framework for mainstreaming climate action into the core functions and capabilities of Ministries of Finance. Following the framework can help ensure climate action is synonymous with sound economic policy, support implementation of the Helsinki Principles and send a strong signal that the world economy is poised to follow a low-carbon, climate-resilient path.

Strengthening the role of Ministries of Finance in Driving Climate Action will be available in full in June, including further detail on the framework and case studies demonstrating the leadership already taking place.

HP3 Publishes Report on International Coordination Mechanisms for Climate Change Mitigation

April 05, 2023

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This is the first report of the Coalition published under the HP3 workstream. The report explores the main instruments available to countries wishing to pursue carbon pricing and builds on the discussions held in 2022 at Ministerial and Sherpa level.

Key observations from the report include:

• Carbon pricing is a key economic policy tool to address climate change; it can be part of each country’s policy mix - depending on country-specific circumstances and transition strategies.

• Multilateral and regional approaches to climate mitigation policies and ways to assess carbon leakage risks should be open, collaborative, and inclusive.

• National and international implications - such as carbon leakage and potential negative spillover effects - and distributional impacts should be carefully considered in designing such reforms.

• The political challenges of introducing carbon pricing and subsidy reforms, as shared by Member Countries in the discussions, underlined the importance of a comprehensive and adaptive approach, the need for different tools to be taken into account in designing reforms, and the importance of analyzing distributional and equity impacts involving relevant stakeholders.

Many thanks to all who contributed to the report and a special thanks to Tatiana Falcão for coordinating the release of the document.

Supporting private sector net zero commitments – the role of Ministries of Finance

March 10, 2023

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This blog is authored by Olha Krushelnytska, Sustainable Finance Specialist in the Finance, Competitiveness, and Innovation Global Practice at the World Bank Group.

Please note: this blog has been cross-posted on the WBG website.

Ministries of Finance play a critical role in driving progress toward private sector net zero commitments. They have levers of influence that are more effective in bringing about change than companies’ voluntary actions .

Incentivizing the private sector to adopt net zero alignment—a commitment to bring net carbon emissions from their activities as close to zero as possible—is urgent. The financial services industry could have outsized influence in meeting the global climate goal and transforming economies. Yet only a little over 500 private financial institutions, representing around 30 percent of private financial sector assets, have made net zero commitments to date. And with about $469 trillion total assets under management (AUM), private financial institutions are large enough to shape investment decisions and bring significant progress.

Not only do the remaining 70 percent of private financial institutions need to set net zero targets. Existing commitments vary in coverage with respect to the share of AUM covered by commitments, and thus lack the comparability that would make them useful for making decisions. Moreover, the credibility of some existing commitments are questionable, as many of those who have committed have yet to set interim, short-term targets, to ensure implementation.

To improve understanding of the voluntary commitments to date, a recent report by the Coalition of Finance Ministers for Climate Action Supporting Private Sector Net Zero Targets examined voluntary financial sector alliances that coordinate climate commitments.  Most, if not all, private financial institutions that made net zero commitments are members of various net zero alliances, such as Net Zero Banking and Insurance alliances. Mostly have arisen in the last few years, these alliances are a suitable proxies of private sector behavior.

The analysis found gaps in commitment comparability and credibility, suggesting the voluntary alliances, as helpful as they can be, do not have the right tools for setting credible net zero targets. Governments, especially the Ministries of Finance, can play a bigger role in supporting private sector net zero alignments – using soft and regulatory power.  Soft power methods include persuasion and incentives, while regulatory power methods cover law and regulatory enforcement (Figure 1).

Figure 1. Soft and regulatory power levers available to the Ministries of Finance to support private financial institutions net zero commitments 

Soft and regulatory power levers available to the Ministries of Finance to support private financial institutions net zero commitments

Adapted from the report Supporting Private Sector Net Zero Targets, Coalition of Finance Ministers for Climate Action, 2022.

The report also examined the actual levers that Ministries of Finance use to promote greener investment in countries who are members to the Coalition of Finance Ministries for Climate Action. These proved to be more effective than incentives within voluntary alliances to date.

For example, in Rwanda, the Ministry of Finance together with the Rwanda Green Fund (FONERWA) applied soft power on the private sector by holding a series of capacity building training sessions and outreach efforts in 2018 and 2020 to promote climate action.  These dialogs culminated in establishment of private sector committees led jointly by FONERWA and the Rwanda Private Sector Federation to discuss options for reaching net zero targets - and laid a strong foundation to boost the credibility of the private financial sector’s involvement in addressing climate change.

In Indonesia, the development of Green Taxonomy 1.0 in 2022 was an exercise in soft power as it brought together various financial service actors into a Sustainable Finance Task Force, which will formulate policy and facilitate capacity building for private financial institutions. Although the green taxonomy is currently used mainly as voluntary guidance, the Ministry of Finance plans to make it a standard in the formation of national initiatives including the decarbonization of state-owned enterprises. It could also be expanded into mandatory disclosures of taxonomy-relevant investment portfolios from the private sector, becoming an exercise in regulatory power.

In Switzerland, the government conducted voluntary assessment of private financial institutions’ climate alignment using the Paris Agreement Capital Transition Assessment (PACTA) methodology in 2017, 2020 and 2022. The program has been well-received by the financial industry but in terms of driving change the results have been mixed, with financial institutions still falling behind their stated climate goals and strategies. These climate assessments may nonetheless be having an impact; more than half the institutions that participated in the 2017 pilot decreased their exposure share with respect to coal power generation and increased their share in renewable power generation, relative to their overall exposure to the power sector. Many stated that they took measures because of their 2017 PACTA results.

Using existing soft and regulatory levers by the Ministries of Finance proves to be effective.

Transition to a net zero future will require increasing government involvement - and understanding of its role is a first important step for supporting private sector commitments and achieving global climate goals.